Page 213 - DCOM505_WORKING_CAPITAL_MANAGEMENT

Working Capital Management Pavitar Parkash Singh, Lovely Professional University

Notes Unit 13: Integration of Working Capital and
Capital Investment Process

CONTENTS

Objectives
Introduction
13.1 Capital Investment Process

13.1.1 Investment Decision
13.1.2 Financing Decision
13.1.3 Dividend Decision
13.2 Working Capital Decisions vs Capital Investment Decisions
13.3 Role of Working Capital in the Investment Process

13.3.1 Working Capital and Marketable Securities
13.3.2 Working Capital and Investment: The Theoretical Perspective
13.4 Summary

13.5 Keywords
13.6 Review Questions
13.7 Further Readings

Objectives

After studying this unit, you will be able to:

 Know the capital investment process
 Discuss Working capital decisions vs capital investment decisions
 Identify the role of working capital in the investment process
 Explain working capital and marketable securities

 Discuss working capital and investment: The theoretical perspective
Introduction

For investment firms rely to a large extent on internal finance especially those firms for which
external finance is either too expensive or just not available. By retaining cash flows, firms
accumulate the financial funds needed for investment. A considerable share of the financial
assets that firms hold takes the form of so called working capital, which consists of short-term
assets and short term liabilities. Working capital is needed for the day-to-day financial operation
of the firm and as such is an important indicator of the liquidity of the firm.

13.1 Capital Investment Process

Capital investment decisions are long-term corporate finance decisions relating to fixed assets
and capital structure. Decisions are based on several interrelated criteria. Corporate management

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